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The Expert View: HSBC, Compass & Informa

Our daily round-up of analyst commentary on shares, including Anglo Pacific and Clinigen Group.

by Michelle McGagh on Nov 08, 2016 at 05:01

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Key stats
Market capitalisation£123,348m
No. of shares out19,874m
No. of shares floating19,789m
No. of common shareholdersnot stated
No. of employees255203
Trading volume (10 day avg.)34m
Turnover37,700m USD
Profit before tax10,044m USD
Earnings per share0.51 USD
Cashflow per share0.70 USD
Cash per share4.25 USD

HSBC raises dividend outlook, says Share Centre

HSBC Holdings (HSBA) has raised its dividend outlook despite profits being down in the third quarter (Q3).

The Share Centre analyst Graham Spooner retained his ‘buy’ recommendation commenting: ‘Banking giant HSBC said that while reported profits were down, Q3 adjusted pre-tax profits, which exclude one-off write-downs, beat analyst consensus expectations and were higher than the same period last year,’ he said.

‘Investors should appreciate that costs continue to be cut and its capital cushion was beefed up, which could support dividends ahead and possible future share buybacks.’

Spooner said income investors in the banking sector had ‘been hit hard in recent years’.

‘HSBC has remained a significant payer and though progress may continue to be slow in the face of many challenges, we believe the shares could be a better option than other banks,’ he said.

‘The bank is viewed as being more conservatively managed with a superior balance sheet and deposits. We recommend HSBC as a ‘buy’ for contrarian investors, but would suggest investors build a holding over time as there is no quick fix for the sector.’

The shares gained 28p or 4.7% to 622.7p.

Key stats
Market capitalisation£23,138m
No. of shares out1,643m
No. of shares floating1,634m
No. of common shareholdersnot stated
No. of employees515864
Trading volume (10 day avg.)4m
Turnover£17,590m
Profit before tax£869m
Earnings per share52.16p
Cashflow per share74.61p
Cash per share17.17p

Compass valuation points north, says Jefferies

Jefferies has lowered its recommendation for Compass Group (CPG) believing shares in the food contractor trade on an above-average price/earning ratio.

Analyst Kean Marden downgraded his recommendation from ‘buy’ to ‘hold’ but increased the target price from £14.50 to £14.75.

‘Although Compass is a quality compounder with attractive total shareholder return credentials, these are well known and prospective price/earnings and free cashflow multiples are elevated relative to history,’ he said.

‘We anticipate inline prelim results on 22 November and unchanged outlook comments. The shares have modest upside to our £14.75 price target and we downgrade to ‘hold’ from ‘buy’.’

Marden predicted the company’s full-year results would report 5.2% organic revenue growth and £1.37 billion profit before tax.

The shares gained 12.5p or 0.9% at £14.03.

Key stats
Market capitalisation£5,589m
No. of shares out824m
No. of shares floating811m
No. of common shareholdersnot stated
No. of employees6570
Trading volume (10 day avg.)3m
Turnover£1,212m
Profit before tax£171m
Earnings per share24.33p
Cashflow per share41.32p
Cash per share4.87p

Shore Capital: Informa back on track

Business-to-business information group Informa (INF) continues to perform well and is back on track with full-year expectations, said Shore Capital.

Analyst Roddy Davidson retained his ‘hold’ recommendation commenting: ‘Informa has published a trading update covering the nine-month period to end September 2016. As anticipated…the release indicates a continuation of the solid performance detailed at the half-year stage and confirms that the group is on track to deliver against full-year expectations,’ he said.

Davidson said he had been ‘encouraged by Informa’s progress over the last few years in delivering improved trading momentum and implementing its growth acceleration plan’.

‘Informa’s stock is trading on full-year 2016 price/earnings and dividend yield ratios of 14.7x and 3.1% respectively, and in our view looks fairly valued,’ he said.

The shares added a penny to 678.5p yesterday.

Key stats
Market capitalisation£212m
No. of shares out170m
No. of shares floating149m
No. of common shareholdersnot stated
No. of employees11
Trading volume (10 day avg.)m
Turnover£9m
Profit before tax£-23m
Earnings per share-14.07p
Cashflow per share-12.44p
Cash per share3.36p

Peel Hunt downgrades Anglo Pacific after rally

Oil resources business Anglo Pacific (APF) has been downgraded from ‘buy’ to ‘add’ by Peel Hunt after a strong rally in the share price.

Peel Hunt analyst Simon Gardner-Bond also increased his share price target from 108p to 128p.

‘Q3 delivered 52% of year-to-date income from a period before the strongest rise in the coal price,’ he said.

‘We update our coal price and exchange rate assumptions. This lifts our risked net asset value to 128p. There is upside to a 226p target if coal sustains at the current spot levels. Following a strong run in the share price we move to an ‘add’ rating, noting that further disruption of coal supply could lead us to upgrade short-term expectations. Potential for rising dividends in 2017-2018 should drive performance.’

The shares edged higher to 125p on Monday.

Key stats
Market capitalisation£845m
No. of shares out115m
No. of shares floating102m
No. of common shareholdersnot stated
No. of employees86
Trading volume (10 day avg.)m
Turnover£340m
Profit before tax£14m
Earnings per share11.80p
Cashflow per share29.98p
Cash per share24.26p

Clinigen to join list of UK pharma champions

A capital markets day at Clinigen (CLINC) has boosted analysts confident in the pharmaceutical company’s growth prospects.

Numis Securities analyst Stefan Hamill reiterated his ‘buy’ recommendation and share price target of 933p, commenting: ‘Clinigen stated its clear intention to become the trusted global leader in access to medicines in a confident capital markets day that effectively presented the synergies across its business and capabilities of the new chief executive and next layer of management.’

Hamill said he left the room ‘with conviction that Clinigen can exploit ongoing market trends and its current strong competitive advantages to grow to a multiple of its current size, given the extent of its addressable market’.

Clinigen is expected to join the ranks of UK global champions like BTG, Abcam and Dechra.

‘These all trade on calendar 2017 price/earnings multiples well into high 20s and 30s while Clinigen still trades at c.17.5x,’ said Hamill. ‘We see the rating being put back into the 20s before too long…and continue to see Clinigen as a sector top pick.’

The shares firmed a penny to 734p on Monday.

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  • HSBC Holdings PLC (HSBA.L)
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  • Compass Group PLC (CPG.L)
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  • Anglo Pacific Group PLC (APF.L)
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  • Informa PLC (INF.L)
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  • Clinigen Group PLC (CLINC.L)
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